Music Industry v. ReDigi: The Problem with Phonorecords: Copyright

When Is a Phonorecord Not a Phonorecord?

Last time, we finally figured out how ReDigi operates and how it plans to get around the fact that it must make at least one (and often two) intermediate copies of a song file in order to complete the sale of the song file. ReDigi’s solution is to structure itself as an Amazon-style music locker and rely on space/format shifting for those intermediate copies.

But this doesn’t get around the other concern I raised (way back here), which we might call the “phonorecord problem.” Recall that the nub of the RIAA’s argument is that the First-Sale Doctrine is limited the distribution right. The RIAA’s point was that the intermediate copies exercised the reproduction right and, therefore, fell outside the scope of the First-Sale Doctrine. While I thought there might be a different way of looking at that issue, it turns out ReDigi is fine with the RIAA’s argument, since it thinks it has an alternate (and better) legal theory regarding those intermediate copies.

The “phonorecord problem” is more fundamental. Under a strict and plain reading of the Copyright Act, the distribution right is limited to the distribution of physical embodiments of the copyrighted works, e.g., a CD. Read literally, the distribution right is limited to the “distribut[ing of] copies or phonorecords of the copyrighted work.” The term phonorecords is defined as “material objects in which sounds … are fixed … and from which the sounds may be perceived, etc. ….” A computer file isn’t a material object.*

* Right? Can anyone think of a basis for saying a computer file is a physical object?

Normally, this doesn’t create a problem. Any digital distribution of a computer file will automatically implicate the reproduction right, and you don’t get extra points for having extra exclusive rights violated. But in ReDigi’s case, it presents a problem. At the time, I thought it was a problem for ReDigi, because if ReDigi’s right to make intermediate copies were tied to its right under the First-Sale Doctrine to distribute the audio files, the right to make those intermediate copies would disappear along with the right to distribute the underlying files. And if ReDigi wasn’t distributing material objects, but only computer files, it might not be able to take advantage of the First-Sale Doctrine. In the case of an audio file sitting on a user’s computer hard drive, the “phonorecord” would be the hard drive–and that’s a little hard to sell!

It turns out that this may be a problem for the music industry, not for ReDigi, now that ReDigi has an alternate (and stronger) argument for the right to make those intermediate copies. If ReDigi’s space/format-shifting argument succeeds, then all the music industry as left is a claim on the distribution right.*

* Well, that and a couple of very minor claims for violation of the public-performance right (update: for 30-second audio clips) and display right (in the cover art). I’ll comment on public-performance issue at the very end of this post.

I don’t know if ReDigi read this blog post, but they took that idea and ran with it. Or, more precisely, turned it on its head. For ReDigi, the “phonorecord problem” isn’t a problem; it’s a solution. ReDigi now argues that it does not violate the distribution right precisely because it doesn’t distribute physical embodiments of the song files; it only distributes digital audio files. It doesn’t need the First-Sale Doctrine at all!*

* The First-Sale Doctrine doesn’t go completely away. The restrictions that Amazon and others place on the right to transfer the license associated with the audio file (discussed here) still have some legal effect, even outside of Vernor. The buyer needs that license to play the audio file (because playing an audio files requires copying from storage to memory); otherwise, the buyer is infringing copyright, and ReDigi is possibly interfering with the contract between Amazon (or whoever) and the original buyer. Remember that Apple’s iTunes does not place such a restriction on transfer. This would explain why ReDigi appears now to be limiting its service to audio files obtained from iTunes.

Digital content has been distributed for quite some time now, and this is, honestly, the first time I had ever thought of it this way. Courts and almost everyone else* have been assuming that digital distributions infringe the distribution right. The music industry’s file-sharing cases were all mostly dependent on a claim of infringement of the distribution right, which led to the knotty question of whether merely making a file available on your shared folder, without more, constitutes a distribution.** Was there, perhaps, a more fundamental question?***

** I think the majority rule is that it does not. You still need to prove that someone else accessed and downloaded the file.

*** It may not have made a difference. The music industry could have argued (persuasively in my opinion) that “making available” a file, plus evidence of downloading of file, constitutes contributory infringement. I suspect the reason the music industry didn’t make this argument was that it preferred to rely on the “making available” theory of distribution (which didn’t work out in the end), and that “distribution” is just conceptually neater.

Have we really been fooling ourselves for the last, I don’t know, 10-15 years*? The issue has come up obliquely a few times since 2001, but as far as I can tell, it’s never really been argued. In New York Times v. Tasini, 533 U.S. 483 (2001), the Supreme Court assumed without analysis that when LEXIS/NEXIS sold copies of articles through its electronic database, it was “distribut[ing] copies of the articles to the public by sale.” It is pretty clearly dicta, as no one appeared to argue otherwise.** In Perfect 10 v. Amazon, 508 F.3d 1146 (9th Cir. 2007), the court followed Tasini’s dicta, again without analysis, and again, no one appeared to have argued the point.

* Actually, we could go back much farther. As early as 1991, scholars were using the text-only Gopher protocol to digitally distribute articles and papers. In 1992, we called it “electronic research” and thought it was the coolest thing.

** Material in a judicial opinion unnecessary for the actual holding of the case is not binding authority and is called “dicta.” In particular, we do not consider authoritative conclusions reached by the court that were not the product of adversarial argument by the parties.

Adding somewhat to the confusion was the 1995 enactment of the Digital Performance Right in Sound Recording Act, which allowed others to make the “digital phonorecord deliveries” of music if they paid a statutory royalty. 17 U.S.C. § 115(c)(3)(A). This wouldn’t be necessary if delivering digital phonorecords weren’t illegal. Further, the same Act made clear that it didn’t affect the (apparently pre-existing) rights “to reproduce and distribute the song recording … including by means of digital phonorecord delivery.” Again, if Congress didn’t think this right didn’t exist already, it wouldn’t have felt the need to protect this right.

As I’ve explained previously, though, Congress’ opinion about the meaning of the Copyright Act in 1995 doesn’t affect the central inquiry, which is what Congress was intending back in 1976 when it drafted the distribution right. Consider the state of technology in 1976 (or even 1978 when the CONTU Report was issued). Congress was aware of computers and software, but the idea of distributing digital content was not well understood, if understood at all. DARPANet was just a baby. Pretty much all one could reasonably transfer over a network at the time was text, and even that took a long time. Could Congress really have had anything in mind other than the distribution of physical embodiments?*

* I understand there’s an article in the Journal of the Copyright Society of the USA, which argues that Congress actually intended the distribution right to be read very broadly, but I can’t seem to lay my hands on it right now. I’ll read it with interest when I do.

In addition, a literal reading of the distribution right would create problems elsewhere in the copyright system. For some reason, the definition of publication is identical to the distribution right, and several important dates are keyed off the first “publication” of a work.* If we read the distribution right literally, we’ll need to read the definition of publication literally, and this could cause all kinds of mischief. Are we really prepared to accept that a song that’s available only as a digital download, or a book or graphic novel serialized exclusively on the Web, isn’t a “publication”?

* Most notably the requirement that you must register your copyright within three months of first publication if you wish to avail yourself of statutory damages or attorney’s fees.

The funny thing is that ReDigi doesn’t actually care how this turns out. From its point of view, it wins either way. If we read the distribution right broadly to include purely digital distributions, then the First-Sale Doctrine applies. If we read the distribution right narrowly to be limited to physical objects, then the distribution right isn’t even implicated. I suppose the music industry could find some way to argue that, while the distribution right should be read broadly, the First-Sale Doctrine should be read narrowly, though that seems intuitively unfair (but not impossible, all the same). Alternatively, the music industry could just concentrate its fire on the reproduction right.*

* Final note: Apparently the public performance right has been raised by Capitol. If ReDigi really is following the Amazon model and maintaining separate copies of every file that is uploaded, i.e., not using the “single master” method of storage, then I don’t see how the public performance right is implicated (as I explained here.) The only person who can enjoy the particular song file is the owner of the file–and that’s not a performance to the public.

Update:It also appears that Capitol isn’t basing its claim for infringment of the public-performance right on any type of “single master” theory, but on the fact that ReDigi allows potential buyers to listen to 30 seconds of an audio file. I guess I didn’t realize ReDigi did that. ReDigi would seem to have a decent, but not slam-dunk, fair-use argument here (though the “30 second rule” is something of legal urban legend), which I’m not going to get into here. Even if Capitol prevailed, it wouldn’t affect the core of ReDigi’s business–it’d just make it harder to promote the songs.

By the way, Rick, it should be pointed out that plaintiff’s moving papers concede that mp3 files are NOT “material objects”. See McMullan declaration, paragraphs 11 and 12. So on this plaintiff and defendant are in agreement.

Of course you may ask why, if they concede mp3’s are not material objects, they are pressing a ‘distribution’ claim… that I can’t answer, at least not in language polite enough to meet this site’s moderation standards.

Rick Sanders
on January 30, 2012 at 11:18 am

Note for readers: McMullen is EVP of Legal Affairs for EMI, Capitol’s parent company. His declaration does, indeed, say that no physical copy is sent over the Internet to ReDigi’s servers.

It sounds like Capitol is trying to have it both ways: physical embodiments are necessary for the First-Sale Doctrine, but not for the distribution right. It’s a great legal argument–if you can make it work! Absent some powerful legislative history, though, I’m not sure how to reconcile those two arguments. Traditionally, the first-sale doctrine has been all about physical embodiments, but you could say the same thing about the distribution right.

Tyler Ochoa
on January 30, 2012 at 2:24 pm

An MP3 file in the abstract isn’t a material object; but an MP3 file doesn’t exist in the abstract. An MP3 file has to be stored in some kind of physical storage medium (hard disk, flash drive). A “phonorecord” is defined as a material object in which sounds (the intangible) are fixed. So, technically, the “phonorecord” is the portion of the hard disk or flash drive in which the MP3 file is stored.
I teach Copyright Law at Santa Clara University School of Law, and am the co-author of a Copyright Law casebook. I agree that, at the time the 1976 Act was written, Congress had in mind distribution of the actual material object (a vinyl disk or cassette, or later, a CD). But since then, Congress amended the act to include “digital phonorecord delivery,” in which the digital data is transferred electronically and is fixed in a material object (hard disk or flash drive) only at the receiving end; and courts have likewise concluded that the distribution right is implicated by digital reproduction (see London-Sire Records v. Doe). So, I think that any argument predicated on the assumption that an MP3 file is not a “phonorecord” will be unsuccessful.

Rick Sanders
on January 30, 2012 at 5:22 pm

Hi Tyler, thanks for joining the conversation! (For those of you who practice in Nashville, Tyler is not only a professor of law at Santa Clara University, but one of our regular speakers at “The Copyright Office Comes to Music City.”)

The London-Sire decision to which Tyler references may be found here, and it indeed takes on this very question head-on (because the EFF had intervened on behalf of the anonymous file-downloaders), which makes it different from decisions like Tasini were the courts appear simply to assume electronic digital transmissions can constitute a “distribution.” On the other hand, London-Sire is a district court decision (D. Mass.) that has not (yet) been followed on this precise point (that I can tell).

In London-Sire, denying a Rule 12(b)(6) motion to dismiss, the court reasoned that the phonorecord at issue was “the appropriate segment of the hard disk” that contained the audio file. Now, I don’t have any difficulty believing that a hard disk can be a phonorecord (though I have a terrible time believing that a segment of a hard-drive can be a phonorecord since you can’t disassociate the segment from the rest of hard drive, even if all the data blocks were lined up nicely–not that I think it makes a huge difference). The phonorecord that is being distributed, therefore, is not one that was ever physically in the possession of the alleged distributor; it came into existence only when the downloader copied the file onto his or her hard drive.

As much I would like to agree with the court’s reasoning (to be clear, I think we’d be better off if electronic digital transmissions were distributions), it still seems to me to do violence to the actual language of Section 106(3): “to distribute … phonorecords of the copyrighted work to the public….” It seems to me that the phonorecord must pre-exist the distribution, i.e., it must leave the hand of the distributor; it is not manufactured by the recipient. If I wanted to re-draft Section 106(3) to make sure I was capturing electronic digital transmissions, I might switch the direct object around, something like this: “to distribute the copyrighted work to the public by fixing or causing to be fixed the work in a tangible medium.” After all, what we care about is the distribution of the work, so long as it gets fixed somewhere in the course of the distribution.

It does place computer files in a weird half-life, at least with respect to distributions (and maybe publications). They’re intangible, but not abstract in the way a sound recording is. Yet they are not physical in the way a hard drive is. Normally, this doesn’t matter: any distribution you can imagine will also be a reproduction. But since ReDigi has a separate defense to the reproduction claim, it comes up here. (In the past, the music industry was very keen on relying on the distribution right in file-sharing cases because they hoped to use the “making available” theory of distribution. That ship has sailed, though.)

Congress’ 1995 Amendment of Section 115 doesn’t convince of very much because (to be cute): it amended the wrong section and it revealed the intent of the wrong Congress. Clearly, the 1995 Congress was assuming that “digital phonorecord deliveries” were distributions under Section 106(3) (and/or reproductions under Section 106(1)–the amendment mentions both). But (1) the Amendment did not actually clarify 106(3); it just assumed what it meant; and (2) a Congress in 1995’s assumptions about what the 1976 Congress meant isn’t very persuasive.

Am I happy with this state of affairs? Not really, though usually it’s an academic question. Perhaps, under the weight of Tasini and London-Sire, the courts will fix what Congress never got around to fixing. There may also be some legislative history that’ll clear the whole thing up (but I note there was little of it in the London-Sire opinion). Of course, from ReDigi’s point of view, it doesn’t matter. Either it’s not a distribution, or the first-sale doctrine (probably) applies–unless the music industry can find some principled reason why it should be able to have its cake and eat it, too.

david hilton
on January 30, 2012 at 7:25 pm

A good discussion – so far as it goes. But you leave out entirely the ‘making available’ right, which was designed precisely to address the possibility that the distribution right might be insufficient for digital issues. That’s why the US led the way in the adoption – and US ratification – of the treaties that create this right.

Also, your discussion is way too US-centric. There is simply no way that the locker system under discussion here can be operated online without crossing national boundaries. In doing so, you immediately encounter dozens of territories – including Canada, and all of Europe – where the ‘making available’ right is far more clearly in place through positive legislation.

Simply put, the owners of rights in sound recordings have far more right than you discuss in your article, both in the US and certainly internationally (including throughout cyberspace).

Rick Sanders
on January 30, 2012 at 7:57 pm

Thanks for the comment. I don’t quite ignore the “making available” theory of distribution–it’s there in passing. The reason I don’t is that, right now, it’s not a separate right under U.S. law. It was (and maybe still is) a theoretical subset of the right of distribution. Thus, any problems with the right of distribution would affect the “making available” theory. My point was: before we even get to that knotty question, we need to ask a more fundamental question: are electronic digital transmissions “distributions” under Section 106(3)?

The music industry relied heavily on the “making available” theory of distribution: that merely making a file available for download constituted a “distribution.” At first, it had some success, but the tide turned pretty decidedly against the theory, as most courts began to require proof of actual access and downloading of specific files by third parties. This is why, for example, Thomas-Rassett was liable for only 9 of the files in her shared folder, even though she had hundreds. (It’s going a bit too far to say the theory is completely dead, I think.)

If other countries, such as the UK, have a specific “making available” exclusive right of copyright, I guess I’m not surprised, but I simply can’t speak to that. Although I love foreign perspectives of U.S. copyright law and copyright in general, I can only blog about U.S. copyright law–that’s plenty for me!

Indeed, there are treaties, to which the U.S. is a signatory, that clearly seek to enshrine a “making available” right. Courts have some obligation to interpret statutes in a manner that would be consistent with treaties, but they will not rewrite the statutes to do so. Time will tell, but right now, most courts seem to hold that it’s not possible to stretch the distribution right far enough to comply with the treaties. If that trend holds, it’ll be up to Congress to add a new right to Section 106 (and thereby clear up some of this mess).

And again, if the making available right is just part of the distribution right, it still doesn’t solve the problem of how one can “make available” a phonorecord over the internet, if a phonorecord is just the physical object to which a sound recording is fixed.